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Phase-out of federal tax breaks imminent for Tesla:

https://apnews.com/181514df80ab40418efe7405e9d2ebb4/Tesla-Model-3-buyers-lose-patience-and-maybe-tax-credits

 

So the Bolt, etc., are about to become much more affordable than the imaginary "$35,000" Model 3. 

 

This is looking more and more like a pump-and-dump scam.  All of the Model 3 reservations boosted Tesla's stock price, along with the promise of the $35,000 base model, but it looks like we're literally never going to get the $35,000 car.  We're likely to see zero under $40,000, or possibly $45,000. 

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Are you implying that Tesla investors were unaware of the imminent phase-out of the tax credits?  I've been an investor since 2014 and I've been aware of the phase-out rule since then, including in 2016 when I made my Model 3 reservation.

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Are you implying that Tesla investors were unaware of the imminent phase-out of the tax credits? 

 

Either they were unaware or they were so caught up in the hype that they didn't care. 

 

I read a book on the American car industry around 2012 that explained in some detail how there is no money to be made in mid-sized and compact cars.  And so when Tesla announced their plan to make mid-sized cars, I knew they were doomed. 

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Ford has announced its plan to completely stop making midsize and compact cars.  Its stock price didn't budge.

 

I'd be interested in reading your book, in particular whether it actually addressed the economics of manufacturing electric midsized cars at scale.  Electric cars really are simpler than ICE cars.  The initial investment is the hardest because there was no infrastructure to support that manufacture (in particular, manufacturing batteries at that scale, which is why Tesla had to build its own massive battery factory).

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I don't recall a mention of Tesla in the book.  At the time they were only producing the roadster, I think.  This was the book:

https://www.amazon.com/Overhaul-Insiders-Administrations-Emergency-Industry/dp/0547577427

 

In other news, I read today that no $35,000 Model 3's are expected to roll off the line until very late 2019 and more likely the fat middle of 2020.  By then it'll be 4 year-old technology and more EV's with better specs will have entered the market. 

 

 

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In other news, I read today that no $35,000 Model 3's are expected to roll off the line until very late 2019 and more likely the fat middle of 2020.  By then it'll be 4 year-old technology and more EV's with better specs will have entered the market.

 

This falls again into "I'll believe it when I see it" territory.  The Great Awakening of the more powerful, well-capitalized OEMs that will suddenly jump in with their vastly larger resources and crush Tesla at its own game has been predicted for years now, before the Model S even hit the roads, let alone the Model 3.  It hasn't happened.  In fact, the larger, more entrenched OEMs have generally made at best tentative steps in Tesla's direction and in fact many, like Ford, have affirmatively stepped in the other direction--going the same way your book suggested and giving up on sedans altogether, opting for basically nothing but gas-guzzling crossovers and SUVs and trucks.  We'll see if that's the right move in the long run.

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The bigger companies are merely dabbling in small electric cars because small electric cars can't make money in the United States.  Luxury electric cars and perhaps luxury electric SUV's can, at least in the small numbers that Tesla produces.  How large is the market for expensive but profitable EV's outside of what Tesla is already manufacturing?  Probably not much bigger.  Gasoline has been cheap for the last 10 years.  Perhaps it will be expensive again in 5-10 years, at which time EV technology will have matured and people will be willing to pay a premium for electric cars. 

 

Right now credit is also loose and cheap so somebody like me, who doesn't make a ton of money but has a high credit score, could walk into the Ford or Chevy dealership with $5,000 down and drive out 90 minutes later with a $45,000 SUV.  Ford/GM just pocketed $4,000-6,000.  That is what is going on all over America right now.  If those same people instead bought $25,000 small cars, the companies only pocket $1,000-2,000 per sale.  That is the central dilemma of the small electric car.  Shareholders for established companies will not tolerate a strategy pushing the sale of cheaper cars, be they gasoline or electric. 

 

 

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Announce another new product

 

They already announced the Semi and Elon has already mentioned a Model Y (crossover SUV-ish) and a subcompact car in the works over the next 3-5 years (so, the next 7-10 years really).


Very Stable Genius

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I can’t find a news article about it, but apparently Tesla sent out an email this morning saying that the Model 3 is now available for purchase without a reservation. I wouldn’t be surprised if only the higher end configurations are available for purchase by the general public and this is nothing more than an attempt to further delay the production of the cheaper, less profitable base models.

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^ Yep. On Tesla's site you can now order a Model 3, but only the "Long Range Battery + Premium Interior" models that start at $49,000. You have to pay $2,500 when placing the order and it delivers in "2-4 months." So, people who have had a reservation for years hoping to get one of the ~$30,000 models will have to keep waiting, while Tesla lets the people who want to buy a ~$50,000 model cut in line. It's obviously an attempt to boost the average selling price.

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You know if Chevy put as much marketing muscle into the Bolt as they do the Silverado or had Muskmouth, used Bolts would sell for as much or more than new ones. Just like Harleys in the '90s.

 

Also, that car is maroon, which is a color that does extremely well on the primary market but terribly on the secondary market.

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She canceled her Model 3 reservation in April after losing confidence in Tesla's ability to deliver a sedan that actually costs $35,000.

 

"If I'm going to spend $53,000 on a vehicle I'm going to look at other things," she said. "I feel like I loaned [Musk] money but didn't get any benefit from it."

 

She "feels like" that because that's literally what she did.

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I'd assume that those deposits sat in an escrow account.  Maybe they're allowed to earn interest on them, I don't know, but I doubt that the law permits them to be invested in anything other than a money market or savings account. 

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The deposits are not held in escow, they are held in Tesla's bank account. From the reservation agreement: "You understand that we will not hold your Reservation Payment separately or in an escrow or trust fund or pay any interest on your Reservation Payment."

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They're not in escrow, as taestell said.

 

Tesla reported earnings after market close today; stock is up almost 10% in after-hours trading, even though it reported the largest loss in its history.  Revenue still increased more than expected and it's hoped/predicted that capex will be lower in the second half of the year.

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The deposits are not held in escow, they are held in Tesla's bank account. From the reservation agreement: "You understand that we will not hold your Reservation Payment separately or in an escrow or trust fund or pay any interest on your Reservation Payment."

 

That is ridiculous.  So if rumors of a Tesla bankruptcy gain steam, everyone will want their deposits back, but the company can drag their feet and your $1,000 goes down with the ship?

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The deposits are not held in escow, they are held in Tesla's bank account. From the reservation agreement: "You understand that we will not hold your Reservation Payment separately or in an escrow or trust fund or pay any interest on your Reservation Payment."

 

That is ridiculous.  So if rumors of a Tesla bankruptcy gain steam, everyone will want their deposits back, but the company can drag their feet and your $1,000 goes down with the ship?

 

It would have to be an extraordinarily hard landing in bankruptcy to have depositors get nothing back.  Deposits up to (IIRC) $1800 actually have a bankruptcy priority even above taxes, though below such things as wages, salaries, and benefits (again within certain limits, not CEO-level salaries).

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People probably wouldn't trade in bonds at all unless there was that lack of downside risk.

 

A detail from the beginning of The Great Gatsby that most people miss is that the narrator is a bond man from St. Louis, and his stay on Long Island was amidst insane Wall St. people who had no patience for bonds.  So if there had been a sequel to the book set in 1932, Caraway could have cashed out his bonds and bought up the mansions around East Egg (or West Egg, or whatever) for cheap. 

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Taking the company private is actually quite the realistic, honest thing for them to do. Let sophisticated investors worry about the massive challenges of the company rather than a market subject to twitter-fueled nonsense. There's way too much irrationality surrounding the company as a publicly-traded entity. Is it worth $420/share? Let other billionaires decide that.

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Ex-SEC chair: Musk's tweet on taking Tesla private puts him at risk of civil and criminal penalties

 

    Elon Musk could face civil and criminal penalties if it's found that he didn't secure financing at the time of his tweet about taking Tesla private, former SEC chair Harvey Pitt says.

    "If you make a false statement in connection with the trading of securities, you run the risk of both having to pay for the damages you caused and also you run the risk of a criminal prosecution," he says.

 

 

 

https://www.cnbc.com/2018/08/08/ex-sec-chair-musk-tweet-puts-him-at-risk-of-civil-criminal-penalties.html?__source=twitter%7Cmain

 

 

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I have to hope that he got that legal advice before tweeting, and therefore was serious about it.

 

It'll be a good day for me, though I actually thought the stock was getting a little bit overvalued and sold about a third of my position in the last 12 months at a blended average of $304.  But the blended average cost basis of my remainder is about $95, so getting bought out at $420 (I think I'll let go of it at that point, since I was already letting go in the low $300s, even though Musk is talking about a special purpose vehicle with limited trading every 6 months to allow investors to stay invested).

 

That is, of course, assuming this isn't all a big bluff to kill off some shorts.

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Now Musk is claiming that the Saudis are going to buy Tesla.  If so, they're going to muzzle him, move production to Asia, etc.  But he gets to save face and not have that day when suppliers stop sending him parts. 

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